A solar energy project is expected to have capital costs of $995,000, average yearly operating costs of $175,000, and a lifetime of 25 years. If the total production during the lifetime of the project is 89,500,000 kWh, what is the levelized cost of energy (LCOE)?(1 point)

Question

Responses

$0.60 per kWh
$0.60 per kWh

$0.77 per kWh
$0.77 per kWh

$0.07 per kWh
$0.07 per kWh

$0.06 per kWh

Answer 1

To calculate the Levelized Cost of Energy (LCOE), we can use the following formula:

\[ LCOE = \frac{\text{Total Costs}}{\text{Total Energy Produced}} \]

Where:

• Total Costs = Capital Costs + (Operating Costs × Lifetime)
• Total Energy Produced = Total production during the lifetime of the project

1. Calculate Total Costs:

   • Capital Costs = $995,000
   • Average Yearly Operating Costs = $175,000
   • Lifetime = 25 years

   So,

   \[ \text{Total Operating Costs} = 175,000 \times 25 = 4,375,000 \] \[ \text{Total Costs} = 995,000 + 4,375,000 = 5,370,000 \]

2. Calculate Total Energy Produced:

   • Total production during the lifetime of the project = 89,500,000 kWh

3. Calculate LCOE:

   \[ LCOE = \frac{5,370,000}{89,500,000} \]

   Now performing the division:

   \[ LCOE = 0.05997 \text{ or } 0.06 \text{ per kWh} \]

Thus, the Levelized Cost of Energy (LCOE) is approximately $0.06 per kWh.

The correct answer is $0.06 per kWh.